Corporate ethics revisited - Comments about the concept of corporate ethics

[Wes Bucey]

I came across this story today as I was researching material for my June 17 presentation on "Change Management = Culture Change."

It prompts me to ask if our Covers feel stories like this are a wave of the future or a rare event that might not be repeated in our lifetimes.

I'm not looking for a poll. I'm looking for comments about the concept of corporate ethics.
A starter question:
Do folks have ethics because it's the right thing to do or because they are afraid of punishment if they get caught?
The following is only an excerpt, the full article is available at the link. This is a story that will probably disappear in a week or two - so, too, this thread will probably disappear, in even shorter time.

http://money.excite.com/ht/nw/bus/20040428/hle_bus-n28303613.html
Nortel Fires CEO in Accounting Probe

Wednesday April 28, 2:00 PM EDT
By Jeffrey Hodgson
TORONTO (Reuters) - Nortel Networks Corp. (NT) fired its top three executives on Wednesday and said accounting problems already under investigation by regulators ran deeper than expected.

The surprise announcement from North America's largest maker of telecommunications equipment sent its shares plunging as investors speculated that an account review begun last year was developing into a full-blown financial scandal.

The Brampton, Ontario company said it expected the restatement to cut 2003 earnings by 50 percent, but losses for previous years would be reduced. It had reported an unaudited 2003 profit of $732 million in January. It said first-quarter results due out Thursday would be delayed.
. . . [deleted]
He said shareholder lawsuits are certain, indictments against company executives possible, and he expects the bad news to drive up the Nortel's borrowing costs.

Nortel said the restatement would not affect previously reported revenues or its cash balance, which was about $3.6 billion on March 31.

TERMINATED WITH CAUSE
The company said chief executive Frank Dunn had been "terminated for cause" and would be replaced by William Owens, a former admiral and vice chairman of the U.S. Joint Chiefs of Staff, who has been a Nortel director since February 2002.

Also fired with cause were chief financial officer Douglas Beatty and controller Michael Gollogly, both placed on paid leave of absence in March.
. . . [deleted]
"The decision to terminate Frank Dunn was particularly difficult, but it is the right decision for the company...the actions announced today by Nortel's board are about accountability for financial reporting," chairman Lynton "Red" Wilson told a conference call.

Asked if they could rule out the possibility of fraud, Nortel officials said it would be "inappropriate" to comment. They said they were unaware of any police investigation.

Nortel is under investigation by the U.S. Securities and Exchange Commission and by the Ontario Securities Commission.

 

[Craig H.]

Wes:

Rare? I would like to think so, but I am afraid not. On the Cove we have discussed what happens when the boundary between consulting and auditing is broken, and the same conflict is there in the financial sphere, as well (not saying that is what happened here).

These cases are just greed, coupled with the emphasis on quarterly earnings reports and short term thinking. Notice that the author of the article felt it pertinant to include the news about share prices? Sure, this case would be special cause variation, but there are those who follow the daily (even hourly) fluctuations of the market like they really mean something. Its all about the money, now. Do they still teach present/future value in business school?

As far as your question, I think the Jewish-Christian ethic (the golden rule) gives some middle ground: we don't do things like this (at least most of us) because of the anguish it causes others. I don't think I know anyone who could live with themselves if they did to Enron employees what Lay et. al. did. So, we have ethics because we are afraid of what the absence of ethics does to others (double that for people we know).

IMHO, and FWIW

Craig

 

[Al Rosen]

There are more out there who just haven't been caught. Just look at Enron, Tyco, MCI, Computer Associates etc...

Do folks have ethics because it's the right thing to do or because they are afraid of punishment if they get caught?

Afraid of punishment.

Signed,
The Cynic.

 

[Wes Bucey]

Should previously terminated employees gloat or sue?

There are more out there who just haven't been caught. Just look at Enron, Tyco, MCI, Computer Associates etc...


Afraid of punishment.

Signed,
The Cynic.

Nortel's press release on the topic can be seen here: http://www.nortelnetworks.com/corporate/news/newsreleases/2004b/04_28_04_ceo_appointment.html

It should be noted the now-terminated CEO (Frank Dunn) presided over a world-wide downsizing of 60,000 Nortel employees since 2001, PLUS in the same period, he acquired 17 companies for approximately $20 billion (not sure, but I think USA dollars, not Canadian.) A number of those purchased companies NEVER had sales, just start-ups.

My question: What thoughts would be going through your head right now if you were one of the 60,000 previously terminated by Frank Dunn?

 

[RoxaneB]

Do folks have ethics because it's the right thing to do or because they are afraid of punishment if they get caught?

A little bit from Column A and a little bit from Column B.

Let's look at speeding tickets. I know someone who got her first speeding ticket recently. Upon getting it, a friend sent her a package on why she should fight it. The reasons were very good. Once the police we'll fight back and tie them up in court, they'll stop dealing out tickets for such minor offences. Why should you pay the full fine if he didn't even show you the radar read-out? When was the radar last inspected? And so on...

Yet, she said, "I was speeding and I was caught. The law is the law. I'm not happy I was caught, but I will accept the ticket." She could have fought it, but she decided that ethically, it wasn't right to do so.

I have been known to say:

There are do's and don't's that you outta be taught,
But they don't mean a thing if you don't get caught.

And, to a point, it's true. There are things that I probably would do and it is the fear of being "caught" (or the knowledge that I would be) that stops me from carrying through. In my heart of hearts, I know it's wrong...but it is the thought of the repercussions that stops me in the end.

 

[RoxaneB]

What thoughts would be going through your head right now if you were one of the 60,000 previously terminated by Frank Dunn?

In my everlasting quest to be nicer to the human race (because I don't want to be caught at being mean ), my first thought would be..

Phew! Thank goodness I no longer work there!

 

[Sam]

Wes, you may as well asked us to define the meaning of life.
Personally I believe that all people are good and that they choose to do bad based on outside influences.
Regardless of the Enrons, stewarts, jacksons and haliburtons they make up a very small portion of society. I don't think we are any worse off then in Roman times.

 

[RoxaneB]

I don't think we are any worse off then in Roman times.

But are we any better?

 

[Greg B]

Do folks have ethics because it's the right thing to do or because they are afraid of punishment if they get caught?

Wes,

Is this not the way we teach our children (to some degree)? They start to act in the wrong manner (unsafe practise or misbehave) and we discipline them so that they understand that it is wrong or dangerous. Will they not then think twice about repeating the action because of possible punishment? It is only as they grow and mature that they discover the reason behind the reprimands or discipline. This is a bit of a Pavlov Dog reaction isn't it?

Greg B

 

[Kevin Mader]

From Wes: "Do folks have ethics because it's the right thing to do or because they are afraid of punishment if they get caught?"

Ethics, I think, are intrinsic. Folks have them because they are the right thing to do. It's a 'values' statement.

Folks doing things because they might get caught are reacting to an outside influence (extrinsic force). Herzberg would say they are acting out of 'movement', not 'motivation'.

Where to corporations sit: most do as they must, reactionary. Few act out of personal responsibility or obligation.

Back to the group...

Regards,

Kevin